I was taught this. Whats the key difference between a rich person and a poor person? Of course factoring out that you are born with a golden spoon you spoil brat asses.
The rich, saves then spends. The poor spends then saves.
Yup thats all.
Once you’re ready to make the change , these are the 3 money-saving rules:
- Pay Yourself First
- Categorize Your Spending
1. Pay Yourself First
When it comes to building your savings, Take Warren Buffet’s famous “save first” quote to heart: “Do not save what is left after spending, but spend what is left after saving.” This piece of advice, paying yourself first, is so simple – but it’s enough to save you from financial disaster.
So what’s the best approach to paying yourself first?
“First, you should open another bank account. Once you’ve “paid” yourself by setting aside a certain amount in your primary account for savings/investments, channel whatever you have left to your secondary account as your shopping budget.”
“That way, you’ll have peace of mind knowing that you saved part of your monthly salary, instead of spending indiscriminately."
2. Categorize Your Spending
While “paying yourself first” is the first commandment of savings, categorizing how you spend your money is just as important. Just think of your paycheck as one big bag of rice that you’re scooping into different buckets. If you ate too much of it without saving some for an emergency – you’ll be starving when famine hits!
So how do you categorize your spending?
Recommend that you divide your funds into the following categories:
- Savings: Having a pool of emergency funds to tide you over once financial disaster strikes.
- Investments: Setting aside that portion of “rice” that you’ll grow and harvest in the future.
- Protection: Buying insurance so that you’re protected from financial risk when accidents/emergencies happen.
- Expenses: Calculate how much you need to survive on a day to day basis (transportation/food).
- Retirement: Setting up a Supplementary Retirement Scheme (SRS) or savings account because face it, your CPF is mostly going towards servicing your mortgage.
- Fun Fund: Setting aside a little bit of money for your monthly retail therapy treatments that keep you out of IMH.
P.S. "wahhhhh suddenly Ken your article is nicely draft, well phrase and neat." Actually no, I copy, paste, edit and change a bit here and there from an article written by Jeff Cuellar in 2013.